Former Minister of State at the Finance Ministry and Ranking Member of the Finance Committee in Parliament has said that the latest statement from the Finance Ministry trying to explain the whereabouts and planned use of the 1billion dollar Eurobond raised in September is the worst explanation so far emanating from the government.

Speaking on Joy FM’s Newsfile programme, Anthony Akoto Osei noted that the main issue the NPP had raised on the Eurobond was why the 1billion dollar bond was not reflected in the 2015 Budget.

“The Government attempts to create the misleading impression that the NPP claimed the Eurobond funds were “missing”. Not so. The point that the NPP has consistently made is that the spending from the sovereign bond proceeds in 2014 were not accounted for in the 2015 budget. In that sense, the proceeds were missing from the budget. In fact, the latest government statement on the issue only serves to confirm that fact.

The most recent attempt by the Government to explain the utilization of the sovereign bond proceeds is indeed the worst of the responses so far and confirm the point that the NPP has made that the Eurobond proceeds were indeed “missing” from the 2015 budget,” he said.

The Former Minister proceeded to question the latest explanation the government had put out on the issue of the Eurobonds proceeds and its planned usage in the 2015 Budget.

“We should remember that the Budget is the financial plan of the government and state for the whole year. Therefore, one wonders how the government can spend such huge amounts like those raised through the Eurobond next year when it was not budgeted for in the 2015 Budget Parliament will approve.

How come the “planned” expenditures for 2015 have not been reflected in the 2015 budget? The rightful place for the actualization of spending plans is in the budget. Without parliamentary authorization how can those expenditures be made in 2015? The excuse that the funds arrived too late to be reflected in the budget is not tenable given the lightening speed with which $250 million supposedly has been transferred to the yet to be properly established Ghana Infrastructure Investment Fund for example, if we are to believe that. The bond proceeds were received on the basis of specific projects and therefore those projects should have been reflected in the 2015 budget,” he said.

On the government’s attempted assurance that it will publish the full utilization of the proceeds after it has been used, Dr. Akoto Osei said “Government business ought not to be conducted this way. It is too shabby. Rather than allaying the doubts in our minds, this statement rather increases the doubts. Is the Government saying that it did not know what the monies were going to be used for before we borrowed the funds? So we have to wait for full utilization of the funds before we know the details of what they are supposed to be used for? ”

Dr. Akoto Osei touched on what is at the heart of the issue, which pertains to the net credit to government by the Central Bank or indebtedness to the Central Bank by the government.

“A look at the Bank of Ghana Monetary Accounts for 2014 reveals the true picture, which is that the sovereign bond has rather been used to reduce Government indebtedness to the central bank and not applied for the purpose for which the funds were borrowed. As we have already pointed out, you cannot eat your cake and have it. What the government is failing to realize is that the Bank of Ghana has to obey the law on lending to government in any particular year. Bank of Ghana Act, 2002 (S.30 (2)) stipulates that the Bank of Ghana cannot extend credit to Government in excess of 10% of Government revenue for the year. The Bank of Ghana, therefore, is restricted by how much credit it can provide Government in the next two weeks of the year.

At the end of the year (in two weeks) if government position at the Bank of Ghana is assessed with the Eurobond proceeds as part of Government deposits at the bank of Ghana, then these funds would not be available to finance the expenditures planned for 2015. This is a simple fact that the Bank of Ghana should explain to the Government,” he noted.

Dr. Akoto Osei also raised issues about the effect the expenditure of over 800million dollars would have on the economy and the targets set by the government when it hasn’t budgeted for it.

“Perhaps, the most important issue surrounding the utilization of the Eurobond proceeds is the macroeconomic implications of the expenditure of some $808 million in 2015 but which was not captured in the 2015 Budget. The expenditure of such an amount would clearly increase the budget deficit, reduce foreign exchange reserves, and increase inflation and exchange rate depreciation. This means that the macroeconomic projections underpinning the 2015 budget would be undermined and ultimately unattainable,” he stated.

The controversy surrounding the use of the Eurobond was sparked after Dr. Mahamudu Bawumia, former Deputy Governor of the Bank of Ghana and Vice-Presidential Candidate to Nana Akufo-Addo, who in reviewing the Budget queried the government on why the Budget was silent on the Eurobond proceeds and what it intends to do with it.

In response, Government has struggled to explain what should be ordinarily a very simple issue. Different and inconsistent explanations have been offered along the way to Ghanaians and international investors who are keenly monitoring the development.

First, the Government explained that:

“The proceeds from the Eurobond issue are being used for the intended purposes as listed in the prospectus, and that was: (1) To fund the investment infrastructure fund, and (2) To pay for infrastructure development that the government has prioritised. And that is what is going to happen…some of them have begun,. The Kasoa bypass is one: that is about 37 percent complete now. The Kwame Nkrumah Interchange…that is about 62 percent complete. The polo grounds bypass, about 92 percent; Ayamfuri…road, 36 percent of that has already been done”

The Minister of Finance further muddied the waters by stating that some $800 million of the funds were sitting intact in a Bank Account in New York. Furthermore Government has claimed that the Eurobond proceeds arrived too late to be accounted for in the 2015 budget.

However, the Bank of Ghana Monetary Survey, which details the accounts of government with the central bank indicates that the proceeds from the Sovereign Bond have wholly been used to reduce government’s indebtedness to the Bank.

The Bank of Ghana Monetary Survey for October 2014 is clear that the 1billion dollars, equivalent to over 3billion Ghana cedis, was used by the government and Bank to reduce government’s indebtedness which stood at a total of GHS10,655.2 million at the end of August 2014.

Consequently, after the use of the Eurobond to settle part of the government’s indebtedness to the Bank of Ghana, the total indebtedness of the Central Government reduced to GHS7,656.6 million.